A penny saved is a penny earned. In India saving money can be especially challenging, considering the population is young, aspirational and the society is increasingly materialistic. We believe in living the best life, and costs money. That leaves us with the question, how to save money for future? How to save money for retirement? How to save money for future investment?
So, How To Save Money For Future Investment? It might appear simple but it is not easy. We save as much as possible. We build a next egg to last 2 years, that means we keep 2 years worth of expenses aside. We get insurances, and then we start saving money for future investments. Investment could be a house or equity, real estate, physical assets such as bullions.
We will see how much do we need to save up and how can we save. What are some different options to keep our money safe from inflation.
How much should I save before investing?
How much I need to save is a very relative topic. Everyone does not have same expenses. Everyone does not earn same amount of money. Since you are using internet, it will be safe to assume, you have income and you want to save money for future. If you earn money, then do a simple math, calculate your monthly income and expenses. Say your your monthly salary income is 30,000 rs, you have a rental property, that earns you 10,000 rs. So, your total income is 40,000 a month.
Then calculate your monthly expenses. Your food, phone, internet, rent, commute, shopping, grocery etc. Say, on average you spend 25,000. And do a simple multiplication, 12×25,000 = 3,00,000 rs is a amount you should have a safety amount. Few things to consider, but not to over analyze on, are you planning to marry or have kids in 2 years? Are you planning to buy a house in 2 years? Your monthly expenses, earnings or ability to save might change, in that case, adjust your math accordingly.
What is the best way to save money for future?
Saving 50% of your paycheck is a great way to start. First check all your expenses and cut on spending, take a bigger chunk and save it. Save it in a higher yielding account, may be it is liquid fund or a high yielding savings account or short term FDs. Make sure you are making more than the inflation rate. Or at least at par. Do not buy into equity products or bond products. The notional values fluctuate and you want a stable fund with easy access for emergency. To redeem equity or bond funds you need few days.
What are 10 ways to save money?
There are many strategies you can deploy, once you know how much you want to save. Saving has two parts, 1 is taking a chunk from your pay check and putting it away and second is cutting back on expenses, so you can set that amount.
- Start a recurring deposit, whenever you get pay check, put that amount in your RD. Almost all online banks offer this feature.
- Cut back on shopping trips. Hopefully, pandemic has shown you how uncertain the world is and you may not need so many cloths and stuff. Instead saving up that amount can bring you financial security.
- Order less and cook more. This is a easy one and while you are home you get chance to move little more ,eat good food and burn more calories.
- Use public transport instead private car to cut on commute expenses.
- Cut subscriptions you do not use.
- Look at your expenses, some might be reduced. One thing worked for me, is electricity, simply changing all bulbs with LED saves me on electric bill.
- Try delaying or avoid owning a private car. Even if you don’t use your car, it will cost you money. with so much options and ride shares, you might not actually need a car.
- Even if you do need a car, buy a used one, this will save you money as long as you do not buy a junk.
- Open a NPS and PPF account, that way you will save income tax and save money for future.
- Check your mobile plan, do you need so much data you are paying for? Cut down to a plan just right for you.
What is the 30 day rule?
Whenever you think of buying a big ticket item, like a mobile or car or an appliance, give it 30 days. PErsonally I think 30 is a big number, I wait for 7 days. Think about it, weigh out pros and cons and try to ponder if I really need it.
Moreover, do not buy any depreciating things like mobile or car with EMI.